RBA: Buying could be as worthwhile as renting

A recently released research paper from the Reserve Bank of Australia (RBA) shines a light on Australia's residential property market that's sure to intrigue those with home mortgages, not to mention investors.

The RBA Financial Stability Department's Ryan Fox and Economic Research Department's Peter Tulip authored the paper, which examines whether it costs more to rent a property or buy one.

Should house prices, in real terms, grow at the same pace of the past 60 years, then buying a house in today's economic climate would cost around the same as renting, the report noted.

Now may be the time to act, given that cheap home loans are still available to borrowers. However, it remains to be seen how much longer the official cash rate will remain at 2.5 per cent.

"[T]he expectations of future capital gains implied by current house prices are in line with historical norms. That allays some concerns about a housing 'bubble'. If house price growth were to be slower than the historical average, as some forecasters predict, then the average home buyer would be financially better off renting," the report stated.

Investors will still have opportunities open to them, of course. While home ownership is desirable, scraping together a home deposit can be difficult. Investors still have chances to lease properties across the country - particularly to would-be first-time buyers who are being pushed out of active markets such as Sydney, Melbourne and Perth.

In terms of where to purchase a new home or invest, buyers may pay attention to Perth, Melbourne or Sydney units, which have posted 3.15 per cent, 2.67 per cent and 3.92 per cent month-on-month growth to June, respectively, according to the RP Data-Rismark Daily Home Value Index.

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